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CISG CASE PRESENTATION

China 23 September 2005 New Pudong District People's Court [District Court] of Shanghai (Xi'an Yun Chang Trade Ltd. v. An Tai International (USA)) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050923c1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20050923 (23 September 2005)

JURISDICTION: People's Republic of China

TRIBUNAL: New Pudong District People's Court [District Court] of Shanghai

JUDGE(S): Chen Huizhen (Chief Judge), Sunli and Cai Donghui (Judges)

CASE NUMBER/DOCKET NUMBER: (2004) Pu Min Er (Shang) Chu Zi Di No. 3221

CASE NAME: Xi'an Yun Chang Trade Ltd. v. An Tai International (USA)

CASE HISTORY: Unavailable

SELLER'S COUNTRY: People's Republic of China (plaintiff)

BUYER'S COUNTRY: United States (defendant)

GOODS INVOLVED: Wine bottles


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 35 ; 78 [Also cited: Articles 59 ; 64 ; 74 ]

Classification of issues using UNCITRAL classification code numbers:

35A [Conformity of goods to contract: quality, quantity and description required by contract];

78A [Interest on delay in receiving price or any other sum in arrears]

Descriptors: Conformity of goods ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Click here for Chinese text of case; see also CISG-China Case [BPC/03]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=48>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

New Pudong District People's Court of Shanghai
Xi'an Yun Chang Trade Ltd. v. An Tai International (USA)

23 September 2005

Translation [*] by Zheng Xie [**]

-   Facts and position of the parties
-   Findings of the Court
-   Ruling by the Court
-   Judgment

The Plaintiff [Seller], Xi'an Yun Chang Trade Ltd., filed the lawsuit with this Court against the Defendant [Buyer], An Tai International (USA), based on a sales contract. After accepting the case on 17 December 2004, this Court formed a collegial bench, which consisted of Judge Chen Huizhen as the Chief Judge, Judge Sunli, and Assistant Judge Cai Donghui. On 19 August 2005, a pre-court session hearing was held, and on 23 September 2005, a public court session was held. The [Seller]'s and the [Buyer]'s agents were presented in the court session. This case was closed.

FACTS AND POSITION OF THE PARTIES

[Seller]'s allegations

The [Seller] alleged that on 19 May 2004, Yuan Wentong on behalf of the [Buyer] signed the sales contract with the [Seller] stipulating that:

   -    The [Seller] should export 2,100 large wine bottles to the [Buyer];
   -    The unit price was US $4.63/bottle FOB Tianjin; the total contract price was US $9,723;
   -    The transportation method was by ocean;
   -    The goods should be delivered at Tianjin Port on 19 June 2004.

After signing this contract, the [Seller] arranged production; the [Buyer] sent its employee to the [Seller]'s factory to examine the goods on site, and agreed ship the goods after its examination; the [Buyer] requested a change in the transportation method for 300 bottles, from by ocean to by air.

After receiving the goods, the [Buyer] alleged that 260 bottles were not qualified, and requested the [Seller] to replace these 260 bottles. Considering the parties' business relationship, the [Seller] decided to ship another 260 bottles by air. Before shipping these 260 bottles, the [Seller] asked the [Buyer] to examine the goods, advising whether they could be shipped after the examination and determining whether they were qualified. However, the [Buyer] claimed that none of the 260 bottles were qualified. Regarding the remaining 1,800 bottles, the [Buyer] sent its employee to the factory again to conduct the examination, and signed the release of qualified goods after finding that the goods were qualified, and agreed to have the goods shipped.

On 21 July 2004, when the goods arrived at Tianjin Port, the shipping company issued a clean bill of lading. However, after accepting the goods, the [Buyer] claimed the goods were not qualified and refused to make the payment. Therefore, the [Seller] requested this Court to rule that:

1. The [Buyer] should pay the contract price of US $9,723;

2. The [Buyer] should compensate the [Seller] for the economic loss (including the loss of export tax return and interest on loan), totaling RMB 10,153.83;

3. The [Buyer] should compensate the [Seller] for the transportation expenses, attorneys' fee, etc. totaling RMB 5,000;

4. The [Buyer] should bear the litigation fee.

[Buyer]'s Defense

In its Defense, the [Buyer] alleged that:

1. Among the two installments, totaling 588 bottles, which were shipped to the [Buyer] by air, only 30 bottles were qualified; among the 1,800 bottles shipped by ocean, only 27 bottles were qualified. Therefore, the [Buyer] refused to make the payment, and requested to return the goods, but the [Seller] did not reply;

2. The manufacturer, Wenshui County Zhong Hong Xing Metal Products Factory, which was the [Seller]'s supplier, expressly stated that it would not claim payment from the [Seller], so the [Seller] did not incur any loss;

3. The export tax return, which the [Seller] alleged, was not relevant to the [Buyer];

4. The [Seller]'s claim for the transportation fee and attorneys' fee lacked legal basis;

5. The [Buyer]'s legal representative was not a party to the contract, so he should not bear any liability.

Evidence submitted by [Seller]

The [Seller] submitted the following evidence to prove its allegations:

1. The offer which the [Buyer] sent to the [Seller] on 19 May 2004, and the sales confirmation sent by the [Seller] to the [Buyer] on the same day to prove the parties' contractual relation;

2. The air bills of lading, invoices and packing lists, issued on 1 July 2004, to prove that 300 bottles were shipped to the [Buyer];

3. The air bills of lading, invoices and packing lists, issued on 15 July 2004 to prove that 258 bottles were shipped to the [Buyer];

4. The ocean bills of lading, invoices and packing lists, issued on 21 July 2004 to prove that 1,800 bottles were shipped to the [Buyer], and that the carrier issued a clean bill of lading;

5. The inspection reports issued on 22 June, 10 and 19 July 2004, respectively, to prove that the goods were shipped after the examination showed the goods were qualified;

6. The manufacturer's production record to prove that all of the goods which were delivered to the [Buyer] were qualified;

7. The [Seller]'s Export Tax Return Registration Certificate and Customs' Import and Export Tax Return Rules to prove the [Seller]'s capacity to obtain an export tax return and the export tax return rate;

8. The 18 transportation tickets including airplane tickets, train tickets, taxi receipts, etc, three receipts of documents review charges, two restaurant receipts, one accommodation receipts, three express mail receipts, one receipt of attorneys' fee, to prove the [Seller]'s expenses incurred for this case.

Evidence submitted by [Buyer]

The [Buyer] submitted the following evidence in rebuttal to the [Seller]'s allegations:

1. The offer which the [Buyer] sent to the [Seller] on 19 May 2004 (the same as the [Seller]'s evidence 1) to prove that the goods that were delivered were not in complete compliance with the [Buyer]'s requirements;

2. E-mails between the [Buyer] and its customers to prove that the [Buyer]'s customers examined the first and second installments of the goods, and found that most of the goods had quality defects;

3. The inspection report (same with the second document in the [Seller]'s evidence 5) issued on 10 July 2004 to prove that the [Buyer] inspected 82 bottles at random at the factory, and found 12 bottles were not qualified, among which eight bottles had severe quality problems, and the conclusion of the inspection report was that the [Buyer] rejected the goods;

4. The correspondence between the [Seller] and the [Buyer] to prove that the [Buyer] raised a timely objection to the quality of goods and claimed damages;

5. Twenty-six photos taken when the [Buyer] examined the 1,800 bottles in the U.S. to prove that the bottles, which were delivered had the quality problems including color difference, bubbles, insects, broken, etc., and that the packages were not in compliance with the contract;

6. Statements by the [Seller]'s supplier's, Wenshui County Zhou Hong Zing Metal Products Factory, issued to the [Buyer] on 16 September 2004 to prove that this supplier promised to give up the contract price for the bottles in this case, and would not claim damages from the [Seller].

Cross-examination of the evidence by the parties and identification of the evidence by the Court

For the [Buyer]'s part, after cross-examining the evidence:

   -    The [Buyer] did not raise any objection to the authenticity of the [Seller]'s evidence 1-4 and the inspection reports in evidence 5 issued on 10 July 2004;
 
   -    As to the other two inspection reports in evidence 5, the [Buyer] alleged that these reports were not submitted within the stipulated period to submit evidence, and were not clear, and that the original documents were not submitted, therefore, the [Buyer] rejected cross-examination of this evidence;
 
   -    As to [Seller]'s evidence 6, the [Buyer] alleged that this evidence was neither submitted within the stipulated time, nor could it prove the [Seller]'s allegations, accordingly, the [Buyer] rejected cross-examination of it;
 
   -    As to [Seller]'s evidence 7 and 8, the [Buyer] alleged that this evidence was also submitted out of the stipulated time, so the [Buyer] also rejected cross-examination.

For the [Seller]'s part:

   -    The [Seller] did not object to the authenticity of the [Buyer]'s evidence 1, 3, 4 and 6, taking the position that the conclusion described in the evidence 3 should be "acceptable," but that the [Buyer]'s evidence 6 could not deny the [Seller]'s claim for the contract price from the [Buyer];
 
   -    [Seller] alleged that [Buyer]'s evidence 2 could not prove the allegation, and was not notarized or certified, so it should not be admitted;
 
   -    [Seller] alleged that [Buyer]'s evidence 5 could neither prove that the goods described were those the [Seller] delivered under the contract in this case, nor prove that the goods had defects as the [Buyer] alleged; the carrier issued the clean bill of lading, so the risk of loss should be borne by the [Buyer]. [Seller] further alleged that the broken packages were probably caused by the [Buyer]'s improper loading and unloading.

This Court's conclusions as to the above evidence were follows:

   -    As to the [Seller]'s evidence 1-4 and the inspection report issued on 10 July 2004, because the [Buyer] did not object to its authenticity, this Court confirmed the validity of this evidence;
 
   -    As to the two inspection reports in the [Seller]'s evidence issued on 22 June and 19 July ([Seller]'s evidence 5 and also [Seller]'s evidence 6), because the [Seller] neither submitted this evidence within the stipulated time nor could it provide the original documents, this Court did not admit the above evidence.
 
   -    As to the [Seller]'s evidence 7 and 9, because the [Seller] submitted the evidence beyond the stipulated time, and the [Buyer] rejected cross-examination, the Court did not admit this evidence.
 
   -    As to the [Buyer]'s evidence 1,3, 4 and 6, because the [Seller] did not raise any objection to its authenticity, this Court confirmed the validity of this evidence;
 
   -    As to the [Buyer]'s evidence 2, because this was issued abroad, and the [Buyer] did not notify and certify the evidence within the stipulated time after the [Seller] raised objection, this Court did not admit this evidence.
 
   -    As to the [Buyer]'s evidence 5, because the photos showed that the bottles were in compliance with the requirements stipulated in the contract, this Court admitted this evidence.

In the pre-hearing session, the [Seller] alleged that the loss of export tax return should be calculated as the amount recorded in the invoice issued by the manufacturer to the [Seller] multiplied by the export tax return rate. However, in the court session, the [Seller] alleged that the manufacturer did not issue a value added invoice. In the court session, the [Buyer] stated that at the beginning of 2004, the [Seller] delivered the samples of bottles to the [Buyer], and the [Seller] and the [Buyer] signed the contract according to these samples, but the samples could not be found After receiving the 1,800 bottles shipped by ocean, the [Buyer] found that the packages were broken, but did not raised the objection to the carrier. Because the inspection was very expensive, the [Buyer] did not entrust a certified commodities inspection agency to examine the goods. Because the [Seller] did not agree on return of the goods, and the warehouse charges were very high, all bottles in dispute in this case had been disposed of.

FINDINGS OF THE COURT

Based on the above admitted evidence and the parties' statements, this Court identified the following facts:

1. The stipulations in the contract between the parties

On 19 May 2004, the [Buyer] sent an offer to the [Seller] for purchase of 2,100 units of 4.5 L bottles; the offer stipulated that the unit price was US $4.63 FOB Tianjin; the total contract price was US $9,732; every bottle should be packed in an EPS box, and the carton box should bear 200 pounds; the goods should be shipped by ocean, and delivered at Tianjin Port on 19 June 2004. On the same day, the [Seller] accepted the offer and informed the [Buyer]'s Shanghai representative office, and the contract was concluded and took effect. However, the parities did not reach an agreement on the time of payment. As to the subject matter of the contract, before the contract was concluded the [Seller] provided samples to the [Buyer] at the beginning of 2004, so this contract was a sales contract by samples.

2. The [Seller]'s delivery to the [Buyer]

The [Seller] shipped two installments of 300 bottles to Chicago and 258 bottles to Los Angles on 1 and 14 July 2004, respectively, and 800 bottles by ocean on 21 July, The above three installments totaled 2,358 bottles. The shipper was the [Seller], and the consignee was the [Buyer]; the freight should be paid by the [Buyer]. The [Buyer] received the goods on time after the normal shipping period.

3. The [Buyer]'s objection to the quality problems

After the first 300 bottles that were shipped arrived in the U.S., the [Buyer] claimed that 260 bottles had quality defects; this was the reason why the second installment of 258 bottles was shipped by air. On 24 August 2004, the [Buyer]'s Shanghai representative office sent a letter to the [Seller] informing that among the 1,800 bottles shipped by ocean, only 27 bottles were qualified, and 918 bottles had painting defects, about 175 bottles were broken, and about 680 bottles had damages. On 10 September of the same year, the [Buyer]'s Shanghai representative office sent another letter to the [Seller] alleging that the inspection results showed that 27 bottles were qualified, 748 bottles could be re-painted, 1,025 bottles were not qualified (including 56 bottles, which here broken, there were 350 bottles which had damages, 618 bottles had insects and other problems), and the 300 bottles shipped by air could not be used at all. The [Buyer] stated that it would only pay for the 27 qualified bottles, and pay half-price for the 748 bottles, which could be re-painted. The [Buyer] sent letters to the [Seller] on 7, 13 and 24 September, respectively, requesting to return the goods. On 6 September 2004, the [Seller] sent a letter to the [Buyer]'s representative office denying the quality defects of the goods, and requesting the [Buyer] to pay the contract price.

4. The [Buyer]'s inspection of the goods

Before the second installment was shipped, on 10 July 2004 the [Buyer] sent its employees to the factory to examine 82 bottles at random; the inspection results showed that 12 bottles had quality defects, the defects of eight bottles were unqualified painting, and the notes showed:

"The defects found by the inspection and the problems discussed were mainly caused by the workers' inappropriate operation when manufacturing the bottles at the beginning; the products manufactured thereafter had no such defects. The 260 bottles for this delivery were produced thereafter."

5. The current condition of the goods

The [Buyer] could not provide the samples of the contract; the goods disputed in this case had been disposed. The goods were inspected by the [Buyer], but were not inspected by a qualified commodities inspection agency.

6. The manufacturer's statement

The manufacturer of the bottles in dispute in this case, Wenshui County Zhou Hong Xing Metal Products Factor, sealed and confirmed an "Agreement" with the [Buyer] on 16 September 2004. The Agreement stipulated that in May 2004 the [Buyer] through the [Seller] ordered 2,100 bottles from Zhou Hong Xing Metal Products Factory. Because the [Seller] did not want to negotiate with the [Buyer] to resolve the issues and bear any liability, the [Buyer] negotiated with Zhou Hong Xing Metal Products Factory and reached the following agreement:

      (1) Considering the long-term business relation with the [Buyer], Zhou Hong Xing Metal Products Factory gave up the contract price for the 2,100 bottles, and the [Buyer] would not claim any expenditures incurred;

      (2) Zhou Hong Xin Metal Products Factory should properly resolve the disputes on the contract price with the [Seller], and promised not to claim the contract price from the [Seller].

7. The [Seller]'s expenses incurred for this litigation

The [Seller] incurred some expenses to hire attorneys, review documents, mail litigation material, to go to Shanghai for the court session, etc.

In addition, this Court found that the [Buyer] did not raise any objection as to the broken packages and claim damages from the carrier.

Furthermore, this Count found that Mr. __ was the [Buyer]'s legal representative. The [Buyer]'s Shanghai representative office was not registered with the Bureau of Industry and Commerce. The office of Room 101, 888/5 Jin Xiu Street, Pudong New District was Mr. __'s property.

RULING OF THE COURT

This court ruled that the dispute in this case arose from an international sales contract between a PRC company and a U.S. company. Because the PRC and the U.S. are Contracting States of the United Nations Conventions on Contracts for International Sales of Goods (CISG), and the parties agreed to apply the CISG, the CISG should apply to this case.

The contract between the parties complied with the above law, so it was valid. The issue in this case was whether the goods conformed to the contract.

      The second installment by air was shipped to replace the unqualified bottles in the first installment as the [Buyer] alleged; however, the destinations of the two installments were Chicago and Los Angles, which are far apart from one other, so the [Buyer]'s allegation could not be proved. According to the notes made by the [Buyer] in the inspection report dated 10 July 2004 and the fact that the [Buyer] paid the freight for the second installment, it could be concluded that the goods in the second installments were "acceptable," and the above facts proved that the goods in the second installment were in compliance with the [Buyer]'s requirements. Even if the [Buyer]'s customers held that the goods were unqualified, this was an issue on the stipulation of quality between the [Buyer] and its customers; according to the principle of privity of contracts, this did not constitute proof that the goods which the [Seller] delivered were not in compliance with the contract between the [Seller] and the [Buyer].

      As to the 1,800 bottles, which were shipped by ocean on 21 July 2004, the carrier issued clean bills of lading. The [Buyer] alleged that the packages of goods were broken at the destination port but it did not claim damages from the carrier. According to the price term FOB stipulated in the contract between the [Buyer] and the [Seller], the [Buyer] should bear the risk of goods during the ocean transportation, so the damages of the 56 broken bottles alleged by the [Buyer] should be borne by the [Buyer] itself.

      The [Buyer] did not entrust a qualified commodities inspection agency to inspect the goods, all of the bottles in dispute in this case had been disposed of, and the [Buyer] could not provide samples. In addition, the [Seller]'s three deliveries to the [Buyer], totaling 2,358 bottles, far exceeded the stipulated quantity of 2,100 bottles stipulated in the contract. Therefore, the photos submitted by the [Buyer] could not prove that the goods delivered by the [Seller] were not in compliance with the contract.

Thus, this Court sustained the [Seller]'s claim for the contract price of 2,100 bottles. As to the [Seller]'s claim for interest, because the parties did not reach an agreement on the time of payment in the offer and acceptance, the interest should be calculated from the time when the [Seller] first urged the [Buyer] to make the payment, i.e., 6 September 2004.

Although the manufacturer promised to the [Buyer] that it would not the claim the contract price from the [Seller], the contract between the [Seller] and the [Buyer] and the contract between the [Seller] and the manufacturer were independent of each other. Therefore, the manufacturer's statement did not constitute a barrier for the [Seller] to claim the contract price from the [Buyer].

In the court session, the [Seller] admitted the manufacturer did not issue a valued added invoice, so the amount of export tax return was not determined, and the pre-condition to obtain an export tax return was not satisfied. In addition, it was not determined whether the [Seller] could go through the export tax return procedure after obtaining the contract price through this litigation. Therefore, this Court did not decide on the [Seller]'s claim for the loss of export tax return.

The [Seller]'s claim for the attorneys' fee, traveling expenses, etc. lacked legal basis.

Mr. __ was the legal representative of the [Buyer], and the contract was signed between the [Seller] and the [Buyer]; according to the principle of limited liability, the [Buyer] should bear the rights and obligations under the contract. Because the office of Room 101, 888/5 Jin Xiu Street, Pudong New District, was Mr. __'s property, the [Seller] should bear the property preservation fee incurred due to the [Seller]'s petition for property preservation.

JUDGMENT

According to Article 145 (1) of the Law of Civil Procedure of the PRC, and Articles 59, 62 and 74 of the CISG, this Court handed down the following judgment:

   (1)   The [Seller]'s claim against the [Buyer]'s legal representative was dismissed;
 
   (2)   The [Buyer] should pay the [Seller] US $9,732 of the contract price with 10 days after this judgment takes effect;
 
   (3)   The [Buyer] should pay the [Seller] the interest on the above amount within 10 days after this judgment takes effect, and the interest should be calculated at the loan interest rate of the China's People's Bank at the same time from 6 September 2004 to the day when the payment is actually made;
 
   (4)   The [Seller]'s other claims were not sustained.

The litigation fee of this case was RMB 3,373 (the [Seller] had prepaid it); of which the [Seller] should bear RMB 535 and the [Buyer] should bear RMB 2,838; the property preservation fee was RMB 975 (the [Seller] had prepaid it too), which the [Seller] should bear; the abroad service fee was US $93, which the [Buyer] should bear. The fees, which the [Buyer] should bear, should be paid within 10 days after this judgment takes effect.

If there is an objection to this judgment by either party, when the judgment was served the [Seller] should submit a petition for appeal through this Court to the Shanghai No. 1 Intermediate People's Court within 15 days, and the [Buyer] should submit a petition for appeal through this Court to the Shanghai No. 1 Intermediate People's Court within 30 days.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of the People's Republic of China is referred to as [Seller]; Defendant of the United States is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Zheng Xie, LL.M. Washington University in St. Louis, LL.M., BA in Economics, University of International Business and Economics, Beijing.

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